Many retailers now sell both in-store and on-line. The environment in which a retail transaction occurs is referred to as the transaction's channel. Often, customers “channel switch,” meaning a customer researches a product in a first channel (e.g., on-line) and then purchases the product in a second channel (e.g., in-store). Retailers are often interested in forecasting which channel a particular customer researching a particular product on-line will use to complete the purchase. In other words, retailers want to know the likelihood the customer will channel switch.
A multi-channel retailer can improve sales by forecasting whether a given customer will purchase in-store or on-line. The forecast information can be used to enable the retailer to create promotions specifically targeted to the customer's likely choice of channel. For example, if the customer usually researches products on the retailer's website but then purchases the products in the retailer's stores, then depending on the retailer's goals, the retailer could offer the customer a coupon for an on-line purchase. Such customer targeted promotions are of major interest to retailers due to the move within the retail industry towards customer-specific selling and marketing.